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SC on Section 138 of the Ni Act: Complainant Does Not Need To Prove His Financial Capacity Unless Questioned By the Accused

Team SoOLEGAL 16 Mar 2022 5:15pm

SC on Section 138 of the Ni Act: Complainant Does Not Need To Prove His Financial Capacity Unless Questioned By the Accused

New Delhi: The Supreme Court has asserted that in a suit filed under Section 138 of the Negotiable Instruments Act, 1881, the Complainant is not required to first present evidence demonstrating his financial capacity.

The Division Bench of Justice KM Joseph as well as Justice Hrishikesh Roy held that the onus is on the accused to raise a probable defence in order to rebut the presumptions in cheque bounce cases, and that the complainant is not expected to confirm the presumption of consideration by leading evidence unless a case is set up in the reply notice to the statutory notice sent.

The Court referred to the Supreme Court's decision in Basalingappa v. Mudibasappa, (2019) 5 SCC 418, in which it was determined that Section 139 of the N.I. Act is an instance of reverse onus.

"It is also true that this Court has found that the accused is not expected to discharge an unduly high standard of proof. It is accordingly that the principle has developed that all which the accused needs to establish is a probable defence. As to whether a probable defence has been established is a matter to be decided on the facts of each case on the conspectus of evidence and circumstances that exist."

The Court reaffirmed this legal position while hearing an appeal challenging a High Court order sentenced the appellant to one year in prison and requiring him to pay a compensation of Rs. 7 lakhs.

It was the appellant's case that the High Court, as well as the two Courts, did not appreciate the law laid down in Basalingappa v. Mudibasappa, (2019) 5 SCC 418 regarding the effect of a "probable defence."

The Learned Counsel for the complainant-respondent, on the other hand, argued that it could be established that the respondent was familiar and friendly with the appellant, bolstering his client's case that the complainant had aided the appellant in his time of need by providing a hand loan. He pointed out that the appellant's case was not made in the reply notice or the statement made under Section 313 of the Cr.P.C. that the respondent lacked the financial capacity to give the hand loan.

The Court had noted at the outset that Section 138 of the NI Act provides that “the Court shall presume that the holder of a cheque received the cheque referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability.”

This presumption, however, is explicitly made subject to the position being proven to the contrary, and thus it is open to the accused to create that no consideration was received and make a 'probable defence' to create his/her case, but it must be initiated by him, as the complainant is not required to confirm the presumption of consideration at his or her first instance during the proceedings under Section 138 of the NI Act.

 


Tagged: Supreme Court   Section 138   Negotiable Instruments Act   Justice KM Joseph   Justice Hrishikesh Roy  
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